CIT (Corporate Income Tax) - Taxable profit quantification
Updated: Dec 28
Portuguese Tax Series - Basic information on the Portuguese tax system
General rule – accounting results as a starting point
As a general rule the Portuguese Corporate Income Tax (CIT) system follows the accounting rules for the quantification of the taxable profit, with some tax specific adjustments.
Thus, such quantification is based on the actual accounting profit or loss with the mandatory tax adjustments to be added (e.g. costs not accepted for tax purpose) or subtracted (e.g. non-taxable accounting results due to tax benefits and other deductions) in the annual CIT return.
Optional simplified system – listed coefficients on turnover
A simplified regime based on turnover is optional for companies (among other requirements) with an annual gross income of less than EUR 200,000 and a balance sheet total of less than EUR 500,000 in the previous year. In such case and for pragmatic reasons, the main principle of taxation in accordance with the ability to pay, measured by the actual increase of the net worth, is replaced by the taxation of a deemed profit based on the taxpayer’s turnover multiplied by a given coefficient.
Such coefficients vary in accordance with the activity performed and are as follows:
4% - sales of goods and products;
35% - hospitality sector;
75% - professional activities as per PIT list of activities (Article 151 of the PIT Code);
10% - remaining services and subsidies to current operations;
30% - non-operating subsidies (mainly capex);
95% - net capital gains or losses, certain other net equity increase, as well as rental and other capital income;
100% - net equity increase arising from acquisitions for no consideration.
Companies need to specifically opt for the simplified regime, this option is valid of 3 years and such tax payers are exempt from special on account payments as well as certain additional charges (autonomous taxation on expenses).
See also: https://pt.jaimecarvalhoesteves.com/post/cit-corporate-income-tax-tax-rates-and-double-taxation-relief
In collaboration with Duarte Roncon and João Pereira de Sousa (ISEG)